Everest corporate parent sued in California

Nov. 9, 2013

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A lawsuit filed by California Attorney General Kamala D. Harris on Oct. 10 alleges that Corinthian Colleges Inc., based in Santa Ana, Calif., misrepresented its job placement numbers by paying a temporary agency to hire former students in short-term positions in one instance and in another allegedly counted students as being placed in a job after they worked two days at a health fair.

Allegations in the lawsuit apply only to the Corinthian College schools in California. The company owns Everest Colleges, which has campuses in Springfield, St. Louis and Kansas City.

The lawsuit alleges the company, in California, ran millions of online and mobile ads stating it offered several programs that it didn’t offer. “Consumers are routinely tricked by these ads,” according to the lawsuit, and were encouraged by recruiters to visit campuses where they were then presented with a different program.

The lawsuit refers to internal emails that indicate the company was aware of a “placement problem” and alleges job placement numbers, at best, were unreliable or undocumented. The lawsuit accuses the company’s chief executive officer of securities fraud when he allegedly stated in a call with investors that the company in 2012 expected to meet or exceed the previous year’s job placement rate of 68.1 percent.

Corinthian Colleges is a publicly traded company with 81,284 students at 97 schools in 25 states.

The lawsuit also alleges the company violated California law by putting seals from the Army, Navy, Air Force, Marine Corps and Coast Guard on recruiting material in a manner that “reasonably could be interpreted or construed as implying federal government connection, approval, or endorsement.”

The lawsuit alleges the company used student enrollment agreements that falsely stated the company is immune from liability for any and all claims — “dissuading students with valid legal claims from taking legal action.”

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The lawsuit alleges that Corinthian’s actions were flagrant because its Everest campuses in California were already subject to a 2007 permanent injunction that bars many of the same practices alleged in last month’s lawsuit.

“We were disappointed to learn today (Oct. 10) of the civil complaint filed by the California Attorney General. We have been cooperating extensively with the Attorney General’s office for nine months, as we have previously disclosed. We were not given advance notice of today’s complaint and have not had the chance to review it in detail.

“We are committed to regulatory compliance and have robust processes in place to correctly record and disclose the job placement information we receive from our graduates and their employers.

“We are proud of the career and technical education that our 15,000 employees provide to more than 80,000 students in the United States and Canada. We will vigorously defend against this complaint.”

California is not the only state that has been scrutinizing Corinthian. Other attorneys general have requested documents, according to the company’s annual 10-K report filed with the SEC in June, which states:

“Since October 2010 the Company has been contacted by attorneys general offices in the states of Florida, California, Massachusetts, New York, Illinois, Wisconsin and Minnesota. Each of those states’ attorneys general office has requested from the Company, either through subpoenas, civil investigative demands, or informal requests, extensive documents regarding our business.

“In most of these states, we understand the attorneys general have been conducting broad inquiries into private sector education companies in their respective states, and not solely into the Company.”